Eurocommercial Properties N.V. (ECP) buys seventh Swedish shopping center and signs letter of intent to acquire a French retail park. ECP depositary receipts now listed on Paris Bourse to obtain tax exempt SIIC (Reit) status in France.
Sweden
ECP has purchased Bergvik Shopping Centre in Karlstad, Sweden at a cost of ⬠36 million to show an initial net yield of 6.3%. The center has a lettable area of 13,750m² in 31 shop units and retailers include H&M, Stadium, Intersport, Lindex, KappAhl and JC. Average rents are around SEK 1,750 per m² and the overall rent to turnover ratio is low at around 5.7%.
The property links the two major Swedish hypermarkets, Coop, which trades locally as Obs! (20,000m²) and ICA Maxi (10,000m²) and was developed in 2003 by the vendor, Konsum Värmland. Taken together Bergvik has a combined annual turnover of almost SEK 2 billion and 7.3 million vistors making it one of Swedenâs most important regional shopping centres, serving a catchment of 300,000, including the city of Karlstad (80,000), the capital of the Värmland region.
ECP now has seven shopping centers in Sweden which represents about 15% of its portfolio, the balance of which is in France (35%), Italy (42%) and The Netherlands (8%). Retail property now represents over 90% of the Companyâs ⬠1.35 billion property assets.
Paris listing
In order to qualify as from 1 July 2005 for the new French tax regime for listed real estate property investment companies the Company obtained a listing on the Paris Stock Exchange (Euronext Paris) on 30 March 2005. As from 1 July 2005 the revenues and capital gains from the French portfolio will be tax exempt. As a counterpart of this exemption, real estate property investment companies, which have elected for this new tax system â" so called âSociétés dâInvestissements Immobiliers Cotéesâ (SIIC) â" will have to pay an exit tax equal to 16.5% of the latent capital gains amount relating to French property. This quotation is in addition to the Companyâs existing Euronext listing in Amsterdam, which remains its home exchange.
The SIIC move, together with the previously announced step up of property values in Italy and the payment of capital gains tax there at the concessionary rate of 19%, means that just under 80% of ECPâs portfolio will have negligible latent capital gains tax liabilities, an important factor under the new IFRS accounting rules.
Commentary
CEO Jeremy Lewis commented today that all prime retail property markets in Europe remained very competitive and so ECP is concentrating its efforts on expanding its investments in the markets it knows best, France, Italy and Sweden. In addition to the Swedish acquisition noted in this press release the Company has signed a letter of intent to acquire a new 28,000 m² retail park to be developed in Caen in Normandie, France, full details of which will be released when the planning formalities have been completed. The Company has also commenced a ⬠150 million program of extension and refurbishment of a number of its existing centers.
Sales turnover in ECPâs retail properties continued to grow in January and February 2005 at around the average rate of 2004 notwithstanding unexciting economies in France and Italy so that rent to turnover ratios remain extremely healthy, providing a sound basis for sustainable rental growth.
Source: Eurocommercial Properties
